Reflection on Angola’s Sovereign Wealth Fund Investment Policy

June 23, 2013

Jose Filomeno de Sousa dos Santos

Angola’s US$ 5 billion Fundo Soberano de Angola (FSDEA) has released their investment policy. The sovereign fund’s asset allocation mix will support three criteria: preservation of capital, long-term return maximization and infrastructure development. The fifty percent allocation to cash, fixed income and G-7 stocks is modeled after the first criterion. The other 50% is open-ended with an opportunistic lens including investing domestically in Angolan prospects like the hotel industry. The sovereign fund has endowment-like characteristics to it, as well as a stabilization function.

The Fundo Soberano de Angola is expected to grow quickly.

To be clear in 2013, the government of Angola has already allocated substantial increases in public spending through Angola’s fiscal budget. The gradual recovery of Angola’s oil sector has improved public finances. In addition, Angola has been able to taper inflation down to single digits, while the country’s reserves amass. Growth in international reserves, especially in periods of high-oil revenues, can be used to maintain steady public spending when oil revenues eventually drop.

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